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2015 (3) TMI 1018 - AT - Income TaxLevy of penalty u/s.271AA - CIT(A) deleted the penalty levy - Held that - The ingredients of section 271AAA, for which reference may be made to subsections (1) and (2) thereof, and which provision only is applicable for the current year - the year of search (s. 271AAA(1) r/w Explanation thereto), and in fact applied by the A.O., vary substantially from that of section 271(1)(c) (Explanation 5), noted at para 6.5.4 of the impugned order, inasmuch as the former provides for substantiation of the manner in which the undisclosed income, as disclosed per s. 132(4), is derived by the assessee. In fact, the ld. CIT(A) records the ingredients of Explanation 5 to section 271(1)(c) at para 6.5.4 of his order, while Explanation 5A to s. 271(1)(c) alone is relevant for a search initiated u/s.132 on and after 01.06.2007, as in the instant case; the former applying only in case of a search initiated before 01.06.2007. Even the decision relied upon by him (at para 6.5.5), i.e., Mahendra C. Shah (supra), is only in the context of section 271(1)(c). The two sections, i.e., s. 271(1)( c) and s. 271AAA, are not only worded differently, with thus different concomitant scopes, are rather mandated to operate exclusively (refer section 271AAA(3)). The foregoing, we believe, would bring forth the basis as well as the validity of our initial observation at para 4.1 of this order, i.e., of the ld. CIT(A) having grossly misapplied himself in the matter. We, therefore, accepting the Revenue s Ground vacate the findings by the ld. CIT(A) as well as his consequent decision as recorded in the concluding sub-para of his order. As explained by the hon ble courts as well as the official pronouncements explaining the provision, is of plugging the generation of undisclosed income and the consequent leakage of revenue for future, why could the same be not read so as to allow the assessee the latitude for providing the necessary details subsequently, i.e., where the disclosure u/s.132(4) is made under excruciating or difficult circumstances. The same of course would be under oath, making it a part of and refer to the earlier statement u/s. 132(4), complying thus substantially and effectively, with the substantive provision of law. Further, the further condition of substantiation , as provided u/s. 271AAA(2)(ii), which was not there in the case, being u/s. 271(1)(c), before the hon ble court in Mahendra C. Shah ( 2008 (2) TMI 32 - GUJARAT HIGH COURT), could only be interpreted to mean of the law casting a further obligation on the assessee to demonstrate the manner of deriving the undisclosed income, as specified per the statement u/s.132(4), as valid and true, i.e., stands validated and is on a firm basis; the presumption as to the truth of the materials found being already provided for u/s. 292C. The said decision would thus be of little assistance to the assessee. - Decided in favour of Revenue s for statistical purposes
Issues Involved:
1. Maintainability of the deletion of penalty levied under Section 271AAA of the Income Tax Act, 1961. 2. Applicability of the conditions stipulated in Section 271AAA(2) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Maintainability of the Deletion of Penalty Levied under Section 271AAA: The Revenue appealed against the order by the Commissioner of Income Tax (Appeals) ['CIT(A)'], which deleted the penalty levied under Section 271AAA of the Income Tax Act, 1961. The CIT(A) had allowed the assessee's appeal contesting the levy of penalty for the assessment year 2009-10. The penalty was initially imposed following a search and seizure action under Section 132 of the Act, which led to the discovery of undisclosed income. The CIT(A) deleted the penalty based on substantial compliance with the provisions, citing the decision in CIT vs. Mahendra C. Shah [2008] 299 ITR 305 (Guj). The Tribunal observed that the CIT(A) had misapplied the law by examining the penalty under Section 271(1)(c) instead of Section 271AAA, which was the relevant provision for the case. Section 271AAA specifically deals with penalties where a search has been initiated and provides different conditions and requirements compared to Section 271(1)(c). The Tribunal vacated the findings of the CIT(A) and remanded the matter back for fresh consideration under the correct provision, i.e., Section 271AAA. 2. Applicability of the Conditions Stipulated in Section 271AAA(2): Section 271AAA(2) outlines the conditions under which the penalty under Section 271AAA shall not apply. These conditions include: - The assessee must admit the undisclosed income in a statement under Section 132(4) during the search. - The assessee must specify and substantiate the manner in which the undisclosed income was derived. - The assessee must pay the tax and interest on the undisclosed income. The Tribunal noted that the CIT(A) had not adequately addressed whether these conditions were met. Specifically, the CIT(A) failed to determine if the assessee had substantiated the manner in which the undisclosed income was derived, a requirement under Section 271AAA(2)(ii). The Tribunal highlighted that the CIT(A) relied on the decision in Mahendra C. Shah, which pertained to Section 271(1)(c) and not Section 271AAA. The Tribunal emphasized that the two sections have different scopes and requirements. The Tribunal also observed that the undisclosed income related to stock was declared by the assessee only in its return of income filed after the search, not during the search itself. This raised questions about whether the income was indeed disclosed in the manner required by Section 271AAA. The Tribunal directed the CIT(A) to re-examine the case, ensuring that each condition under Section 271AAA(2) was separately evaluated and satisfied. Conclusion: The Tribunal allowed the Revenue's appeal for statistical purposes, vacating the CIT(A)'s findings and remanding the matter for fresh consideration under the correct legal provisions. The CIT(A) was instructed to re-evaluate the applicability of Section 271AAA, ensuring compliance with all stipulated conditions, and to provide the assessee an opportunity to present its case.
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